Correlation Between Sharecare and CareMax

Can any of the company-specific risk be diversified away by investing in both Sharecare and CareMax at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sharecare and CareMax into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sharecare and CareMax, you can compare the effects of market volatilities on Sharecare and CareMax and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sharecare with a short position of CareMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sharecare and CareMax.

Diversification Opportunities for Sharecare and CareMax

-0.4

Correlation Coefficient

Sharecare  CareMax

Very good diversification

The 3 months correlation between Sharecare and CareMax is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sharecare and CareMax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareMax and Sharecare is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sharecare are associated (or correlated) with CareMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareMax has no effect on the direction of Sharecare i.e., Sharecare and CareMax go up and down completely randomly.

Pair Corralation between Sharecare and CareMax

Given the investment horizon of 90 days Sharecare is expected to generate 256.89 times less return on investment than CareMax. But when comparing it to its historical volatility, Sharecare is 271.83 times less risky than CareMax. It trades about 0.15 of its potential returns per unit of risk. CareMax is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1.69  in CareMax on September 4, 2024 and sell it today you would lose (0.73) from holding CareMax or give up 43.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	71.43%
Values	Daily Returns

Sharecare  vs.  CareMax

Sharecare

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Sharecare has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Sharecare is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

CareMax

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CareMax are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CareMax showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sharecare and CareMax

The main advantage of trading using opposite Sharecare and CareMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sharecare position performs unexpectedly, CareMax can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CareMax will offset losses from the drop in CareMax's long position.

The idea behind Sharecare and CareMax pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.